The market in Antwerp has been quiet over the past few weeks.  First there were the ‘business review meetings’ – BRM - when the DTC’s upper echelons came and visited each Antwerp based sightholder.  Now the sightholders and potential applicants are in the countdown to profile submission on 18 July.  “No time left for selling diamonds” said one sightholder.

This is perhaps the most critical profile sightholders have written, as there are rumours of a possible slash of up to 30 sightholders in London.

The sightholders, DTC brokers and the professional writers are all frenzied with how to maximise the impact on the DTC of their operations, both overall and specifically, for the bands of goods they are applying for.

The status of the finances of a sightholder, or applicant, has changed. Whereas up and until the last profile submission within the scope of SoC 1, as it is now referred to, the financial strength of a sightholder was judged both on its own strength and progress, and relative to the performance and strengths of the other sightholders.  This created a side industry of cosmetic surgery on the balance sheets.  If your sales grew faster than your competitors, or if your profitability was better than theirs your allocations of rough would be better in the next cycle.

Now, SoC II has pass or fail thresholds, which most sightholders will easily exceed.  After that, technically, the financials are of less relevance.  In reality, the opposite may be true.  The full profile will require justifying an application for a specific category of goods.  The financials will have to show that your company is strong enough to finance the activities described in that justification and in the event that your allocation for that band of goods is increased.  The financials provide the DTC with the most objective tool for prioritising and grading sightholders.

Let’s say that two sightholders have similar stories in their profiles justifying their applications for a specific category of rough which they have presented in their BRM’s and profiles. After their DTC  account managers have presented their clients’ cases, it is their financials that will most probably be the main criterion for preferring one over the other.

However, it is not so simple anymore.  First, all group companies, for the first time have to be audited – see Soctrates.  Second. there are other rumours that all sightholders will be forensically investigated ‘Krolled’ this time.  Both of these limit the scope of creativity when preparing the books and require a higher level of accounting sophistication.

From the accounts I have been asked to review, accounting opportunities have been missed, those confident of being selected should now be planning for their financials  2010 selection.

editor@diamondfinance.info